India is expected to continue heavy expenditure on infrastructure in the Union Budget 2026. Government spending on infrastructure may go beyond INR 12 lakh crore in FY27. This would mean an increase of nearly 10% compared to the current financial year. The plan shows the government’s clear focus on growth through long-term development.
A report by the State Bank of India says infrastructure spending remains a key part of economic planning. The report arrives ahead of the Union Budget 2026, which Finance Minister Nirmala Sitharaman will present on February 1. Despite global uncertainty, the government plans to stay firm on capital expenditure.
Government figures show a strong rise in capital spending over the last ten years. In FY16, central government capital expenditure stood at INR 2.5 lakh crore. By FY26, this number rose to INR 11.2 lakh crore as per budget estimates. This consistent rise reflects large investments in roads, railways, power, housing, and urban projects.
Support for asset building has also increased. Grants for creating capital assets grew from INR 1.3 lakh crore in FY16 to INR 4.3 lakh crore in FY26. These funds help states and public bodies build roads, bridges, schools, and other facilities. Public sector companies also added to this push. Central Public Sector Enterprises spent approximately INR 4.3 lakh crore in FY26 through their own funds and borrowings.
The effective capital expenditure reached INR 15.5 lakh crore in FY26. Total government capital spending from all sources increased from INR 7 lakh crore in FY16 to nearly INR 19.8 lakh crore in FY26. Capital spending formed around 5.5% of GDP in FY26, showing its importance in the economy.
For FY27, higher spending is expected in roads, highways, railways, urban transport, renewable energy, and digital infrastructure. Better roads and rail networks aim to cut travel time and transport costs. Urban projects may improve daily life in cities. Energy and digital projects may support future growth.
On the borrowing side, the SBI report estimates net central government borrowing at INR 11.7 trillion in FY27. This forms a major part of the fiscal deficit. Repayments may reach about INR 4.6 trillion. State governments may borrow around INR 12.6 trillion, with repayments of nearly INR 4.2 trillion.
While global risks remain and changes in oil prices and global markets may affect government finances, infrastructure spending is still seen as a strong way to support jobs, demand, and private investment.
The expected rise in infrastructure spending above INR 12 lakh crore in FY27 shows the government’s continued belief that building infrastructure is key to India’s growth story.
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